Hedge funds cautious after losses on Tesla shorts

Hedge funds that bet against Tesla Inc. have lost significantly since the November elections. After Donald Trump was re-elected, these funds experienced losses exceeding $5 billion. As a result, short positions in Tesla now make up only 2.5% of the company's publicly traded shares. This is much lower than the historical average of about 23%. Many fund managers are being cautious after losing money in previous short positions against Tesla. For instance, Kerry Goh, CEO of Kamet Capital Partners, has not shorted Tesla since 2019, believing that the current market drop is just temporary. He stresses the unpredictability of trading Tesla's stock. After the elections, Tesla's stock initially soared. This rally was tied to CEO Elon Musk's ties with Trump. Recently, Trump even expressed support for Tesla at a White House event. However, there are concerns about Tesla’s performance in Europe, where registrations have seen a steep decline. For instance, registrations in Germany dropped more than 70% early this year after Musk's political involvement. Short sellers have earned about $18 billion since December, but the outlook on Tesla remains uncertain. A Morgan Stanley survey indicated that 85% of respondents believe Musk's political actions are harming Tesla, yet 45% still expect the stock to rise. The average price target suggests a more than 50% increase for Tesla over the next year. Analysts view a pullback in the stock as a potential buying opportunity. Some urge investors to hold off on significant bets until June, when Tesla plans to launch a new self-driving taxi service. This event could be crucial for the company's future, but caution is advised given Tesla's volatile history.